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The forced removal of executors

Feature Articles

Cite as: (2007) 81(6) LIJ, p. 56

Beneficiaries can take heart from the fact that Victorian courts have the power to remove unfit executors.

By Matthew Groves

Beneficiaries can take heart from the fact that Victorian courts have the power to remove unfit executors.
By Matthew Groves

The power to choose an executor is an important element of testamentary freedom and there is strong authority that courts will not easily set aside the choice of executor of a deceased person.[1] But it is equally clear that the courts may do so when it is in the best interests of the beneficiaries of the estate and the preservation of their interests.[2] 

The important question in such cases is whether the conduct of an executor warrants his or her removal to protect the interests of the beneficiaries and estate.

Source of power to remove an executor

In most Australian jurisdictions the power of a Supreme Court to grant probate provides an inherent power to revoke a grant.[3] Probate may be revoked if the court is satisfied that “the due and proper administration of the estate had either been put in jeopardy or ... prevented either by reasons of acts or omissions on the part of the executor ... ”.[4] The revocation of probate enables the court to indirectly force the removal of the executor, because a new grant of probate is made to another person.

In Victoria, an executor may instead be removed by s34(1)(c) of the Administration and Probate Act 1958 (Vic), which empowers the Supreme Court to remove an executor who is unfit to act in that office. This provision means that the removal of an executor in Victoria does not require the revocation of probate and the issue of a new grant. Recent cases concerning s34(1)(c) suggest that Victorian courts determine applications to remove executors by principles similar to those used in other Australian jurisdictions. The common principle that guides all such cases is that the court will order the removal of an executor if it is satisfied this is necessary for the due and proper administration of the estate and the interests of the beneficiaries of the estate.[5] 

Victorian courts initially adopted a narrow approach to the grounds for removal of an executor. In re Turner,[6] which was the first case decided under the predecessor to s34(1)(c), held that “unfit” encompassed unfitness due to disqualification by reason of bankruptcy or conviction of a felony but not other conduct that suggested an executor could not properly discharge his or her duties, such as proof of a serious conflict of interest or gross delay on the part of an executor. Ashley J disagreed with this in Monty Financial Services v Delmo,[7] holding that “unfit” extended to conduct such as a breach or neglect of duty or a conflict of interest. This broader purposive approach to s34(1)(c) has been authoritatively accepted by the Victorian Court of Appeal.[8] 

When will a court order the removal of an executor?

Although s34(1)(c) must now be given a more purposive interpretation, the full extent of that power remains unclear, because courts have pointedly declined to provide an exhaustive explanation of the power to remove an executor.[9] But the cases decided to date provide some indication of the conduct that might satisfy a court that an order of removal is in the interests of the proper administration of the estate or the interests of the beneficiaries of the estate.

Delay or neglect

Delay or neglect are common complaints about executors. The facts that might support a finding of undue delay will always depend on the circumstances of each estate, but it is clear that an executor who “sits idly by for an inordinate period of time without good cause” will be removed.[10] On this view, an executor who fails to finalise a simple estate or does virtually nothing other than obtain a grant of probate may be removed. Complaints of delay are commonly made when an executor either fails to locate and secure assets of the estate, or fails to liquidate assets within a reasonable time. But an executor who has apparently delayed completing tasks or making a final distribution will not be removed if he or she can satisfy the court that this was appropriate in the circumstances.[11] 

There are cases in which the courts have accepted evidence of delay and concluded this alone was not sufficient reason to remove the executor, but ordered removal because delay was one of many complaints against the executor.[12] This approach suggests that delay may be cited as the sole ground for removal but, where the delay is not extreme, it may still support a wider claim that the executor cannot perform the duties of his or her office.

Complaints of neglect raise similar issues. The most common form of neglect is a failure to communicate promptly or adequately with beneficiaries of the estate. An executor who refuses to reply to either correspondence or reasonable requests for information from beneficiaries may be removed under s34(1)(c). Sometimes an executor may complain that repeated requests for information have caused delay and, therefore, do not provide a reason for removal. Most cases take the view that the best solution is for the executor to respond in a helpful and timely manner, and that he or she cannot complain of repeated queries that follow a failure to do so.[13] 

In Monty Financial Services Ltd v Delmo,[14] Ashley J held that the motives behind any delay or neglect were not relevant. The important issue was the effect of that conduct on the interests of the beneficiaries and the estate. On this view, it does not matter whether the conduct complained of was deliberate, negligent or inadvertent, but whether it has had a sufficiently adverse effect on the administration of the estate. This reasoning shows that an executor cannot cite ignorance about either the duties of an executor or the nature of the estate to defend a complaint of neglect or delay.

Disputes between co-executors

Most applications for removal of an executor involve disputes between beneficiaries and an executor, but there is no reason why a serious dispute between co-executors cannot provide a reason for an application by one executor to remove the other. Byrne J appeared to accept that possibility in Mann v Grantham.[15] His Honour declined to grant an application by one co-executor for removal of the other because the long history of serious dispute between the two did not demonstrate unfitness on the part of the co-executor against whom the application was brought, but rather that the two co-executors had not and could not work amicably together. Byrne J instead allowed the respondent co-executor to be discharged from office under s34(1)(b) of the Administration and Probate Act 1958 (Vic).

This outcome suggests that the voluntary discharge of an executor is always possible where an intractable dispute arises but there is no evidence to support a complaint of unfitness.

Conflicts of interest

A serious conflict of interest may warrant removal of an executor, but it is clear that not all conflicts will. Many cases have accepted that executors may inevitably be involved in the affairs of the estate they manage.[16] The point at which an interest becomes a sufficient reason for removal appears to be when it presents an executor with irreconcilable tasks. The classic example is when an executor either claims or wishes to purchase an asset of the estate. In such cases an almost impossible conflict arises between the executor’s official duty to protect the interests of the estate (by either disputing dubious claims to assets or seeking the best possible price for them at sale) and the executor’s personal desire to obtain an asset (either by making a claim against the estate or seeking the lowest possible price for the asset).

In Fysh v Coote,[17] the Victorian Court of Appeal held that an executor’s conflict of interest would lead to an order of removal when the executor was unable to “act independently and deal adequately” with conflict or potential conflicts. In that case, an executor wished to purchase the interests of other beneficiaries in a flat that was the main asset of the estate. There was dispute over the value of the flat, who was liable for its poor condition and whether the executor should pay occupier’s rent prior to purchase. The executor refused to settle the estate until the other beneficiaries accepted her claims. The Court of Appeal ordered the executor removed because she was unable to recognise and manage the conflict before her.[18] 

An important issue that arises from the cases concerning executors’ conflicts is the extent to which the principles governing the removal of trustees are relevant. Although the roles of executor and trustee are distinct, and remain so even if a person is appointed as both executor and trustee, the fiduciary nature of each means they possess many common qualities. The courts have accepted that these similarities make principles governing the removal of trustees relevant to the removal of executors.[19] Accordingly, a beneficiary seeking the removal of an executor for a reason not the subject of previous judicial decision should examine the law governing trustees to determine whether guidance can be drawn from that area.

The extent to which administration has been finalised

Re Greif; Kantor v Wilding[20] suggests that the court may allow an otherwise unfit executor to remain when relatively few tasks remain, they are simple and the executor may be supervised. In that case, the court refused to remove an executor despite strong evidence of many problems with the administration of the estate, because by the time the application was brought the estate could be finalised easily and the executor had agreed to an independent audit of his work. This decision suggests that beneficiaries with good reason to seek removal of an executor should seek removal sooner rather than later.

Costs

The normal rule that costs follow the event is subject to exceptions in probate proceedings.[21] Costs therefore require special attention, particularly if an action might diminish the very estate it seeks to protect. Diminution is often possible because, if a claim against a deceased estate succeeds, costs may be ordered to be paid out of the estate. Costs can be awarded against the estate if a claim fails, depending on the nature and strength of the claim.[22] An executor normally stands outside these issues by acting on behalf of the estate and can seek an award of costs from either the estate or an unsuccessful party, depending on the outcome of the proceeding.[23] 

Different considerations arise in applications to remove executors. The cases suggest that the presence or absence of fault on the part of an executor is crucial to costs. An executor whose conduct is sufficiently poor will face personal liability for costs without the normal right of indemnity from the estate. Accordingly, an executor may incur personal liability for costs where a clear case for removal is established.[24] A court that makes strong adverse findings about the executor’s conduct can also award solicitor-client costs against the executor.[25] In one case that held the balance of convenience did not warrant removal, the court ordered costs against the executor on a personal basis by reason of his poor performance. These cases suggest that an estate may not be diminished by removal proceedings, even if those proceedings fail, if there is a sufficiently strong case against the executor.

Conclusion

The willingness of a court to order the removal of an executor will always depend on the circumstances of each case, but there are several issues relevant to the preparation or defence of a removal application. They are:

  • Has the executor failed to answer reasonable requests by beneficiaries for information about administration of the estate? If the executor has refused to acknowledge or act on those requests, evidence of this would confirm the existence of delay or neglect. Courts are attentive to the time an executor takes to respond to the complaint of a beneficiary and whether any response shows a willingness to consider or discuss those complaints.
  • Has the executor delayed important tasks? If so, why? Delay itself is not sufficient reason to find executors unwilling or unable to perform their duties. There must also be evidence that the delay is excessive and unwarranted in all the circumstances.
  • Does the executor have a difficult or serious conflict? Conflict will not itself force an executor’s removal. The tension inherent in the conflict must be either one that no reasonable person could manage or one that the executor in question has proven unable to manage. A serious conflict will likely lead to removal. The effect of a less serious one may depend on the executor’s ability to accept the existence of the conflict and take advice to manage it.
  • How much of the administration of the estate remains outstanding? An unfit executor may not be removed if relatively little remains to finalise administration.
  • What do other beneficiaries of the estate think? There is no authority to suggest that all beneficiaries must join an application for removal, but there can be little doubt that unanimous agreement between the beneficiaries would influence a court.

MATTHEW GROVES is a senior lecturer in the Faculty of Law, Monash University.


[1] Monty Financial Services v Delmo [1996] 1 VR 65; Baldwin & Neale v Greenland [2006] QCA 293 at [44].

[2] Dimos v Skaftouros (2004) 9 VR 584.

[3] Bates v Messner (1967) 67 SR(NSW) 187 at 191; Porteous v Rinehart (1998) 19 WAR 495 at 504; Williams v Williams [2005] 1 Qd R 105 at 107.

[4] Mavrideros v Mack (1998) 45 NSWLR 80 at 108.

[5] See In the goods of Loveday [1900] P 154; Bates v Messner, note 3 above, at 191-192; Dimos v Skaftouros, note 2 above.

[6] [1923] VLR 189.

[7] [1996] 1 VR 65.

[8] Fysh v Coote [2000] VSCA 150; Dimos v Skaftouros, note 2 above (overruling In re Turner, note 6 above).

[9] Bates v Messner, note 3 above, at 191-192; Dimos v Skaftouros, note 2 above, at 593.

[10] Sharpe v Forbath [2000] VSC 282 at [21].

[11] Tuohey v Tuohey [2002] VSC 180. The executor approached a difficult dispute cautiously, set aside funds for litigation costs and delayed a final distribution pending resolution. The court accepted that these delays were reasonable.

[12] Fysh v Coote, note 8 above, at [25]-[27].

[13] Mavrideros v Mack, note 4 above; Arnell v Thomas [2004] QSC 293.

[14] Note 1 above, at 73.

[15] [2004] VSC 156.

[16] Fysh v Coote, note 8 above, at [25].

[17] Note 8 above, at [26].

[18] See also In re Crane (2005) 93 SASR 198, where a similar problem led to the denial of probate to a would-be executor.

[19] Dare v Darcy; Darcy v Dare (unreported, Vic Sup Ct, Teague J, 10 November 1993); Monty Financial Services Ltd v Delmo, note 1 above, at 73-83; L McCredie, Wills and Probate and the Administration of the Estates of Deceased Persons in Victoria (2nd edn), 1989, Butterworths, [332].

[20] [2005] VSC 266.

[21] Middlebrook v Middlebrook (1962) 36 ALJR 216 at 217, per Dixon CJ.

[22] Browne v McEnroe (1890) 11 LR(NSW) Eq 134, 145; Public Trustee v Hall [1937] SASR 252 at 253-255.

[23] The executor may even seek client-solicitor costs from the estate in an appropriate case: Re Hodges (1988) 14 NSWLR 698 at 709.

[24] Sharpe v Forbath [2000] VSC 282.

[25] Dimos v Skarfouros [2002] VSC 219, upheld on appeal: (2004) 9 VR 584.

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